FIXI

If there is one certainty in trading it is this. The market will ‘mess with your mind’, and mess with your mind in ways you would not have even thought possible. And in a nutshell this is what this module and the associated workbooks are all about.

No course on trading psychology would be complete without an overview of the brain, and how it can control and impact our trading behaviour. And here the two regions of particular interest to us are the amygdala and the pre-frontal cortex.

This is the first podcast to the fundamental analysis module, and it is I want to explain what you need to understand about the fundamental news, and its impact on the markets.

All economies move in cycles which repeat endlessly. The timescale over which this occurs will differ, but the cycle itself will be repeated again and again.

Fundamental data comes in many different shapes and size, and is available from many different sources.

Politics also plays a part here, with politicians themselves, and in the last few years we have also seen some key referenda coupled with shifts in grass roots sentiment.

As the economic powerhouse of Europe and the glue that holds the Eurozone together, at least for the time being, any economic release from Germany, has an impact not only in Germany, but also the Eurozone, and to some extent globally.

We all borrow money in a variety of different ways, and the bond market is structured in such a way as to allow all sorts of bodies, including countries, governments, municipal authorities and private companies, to borrow money for a variety of reasons. So let me take a simple example to explain how the bond market works.

Every decision taken by every investor, trader or speculator, in every financial market everywhere in the world is about money. Nothing else – just money.

But how do we analyse this huge market to help us in our trading? And here the answer is yield.

Just like bonds, commodities are generally ignored by the majority of forex traders, but for very different reasons. Bonds are ignored because they are considered to be complicated and confusing and of little value, an image I hope to shatter in this book.

The third of the four capital markets is probably one that is very familiar, and agains is one few, if any forex traders ever consider, and that is equities.

The last of our four capital markets is the forex or currency market, which is unique for a number of reasons.

Bonds are the basic ingredient of the world’s debt capital markets, and is where money is borrowed by, and lent to, governments, companies, organisations and countries.

So, how do we interpret what the bond markets are telling us, but before doing so let’s look at some bond market terminology, and in particular what is meant by “yield”.

Now in terms of yield there are three types, and these are: Nominal yield, current yield, and 
yield to maturity. And it is the second and third of these which are most useful to us as forex traders.

Finally let me cover one of the bond markets I mentioned in another video podcast, namely the Eurodollar market, and for this we need to turn to the futures market.

Now perhaps we come to the most complicated aspect of yield, namely, the yield to maturity. And this is the aspect of yield we need to analyse when considering the bond markets over a longer time horizon, and is what is known as the yield curve. This is often simply referred to as “yield.”

As forex traders one of the first things we have to learn and appreciate is the role the US dollar plays in the financial markets.

But why do countries adopt a currency peg and what are the benefits? But perhaps a supplemental question is why is this important even to a scalping forex trader. And the answer is the Euro!

For many traders and investors, price and the price chart itself are the beginning and the end of technical analysis, and this perhaps best describes those traders who classify themselves as price action traders, because all they ever consider is the price and nothing else.

The question you may well be asking yourself now is why volume price analysis, and what’s so special about it. So let me dive right in and try to answer this for you straight away.

It is perhaps one of the great ironies of trading, that we often have to consider things from the inside out or from the upside down, and none more so when considering the whole approach to the business of making money.

In this module we are going to begin to consider the broad market approaches that help us with our trading tactics, timing and trading plan. And the place to start is by taking a look at the give broad approaches to the market.